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Estate Planning with See-Through Trusts for Retirement Accounts Toolkit
Practical Law Toolkit w-031-5921 (Approx. 6 pages)
Estate Planning with See-Through Trusts for Retirement Accounts Toolkit
by Practical Law Trusts & Estates
| Maintained • USA (National/Federal) |
A collection of Practice Notes, Charts, Standard Clauses, and State Q&As that provide guidance and information on estate planning with see-through trusts for retirement accounts, including conduit trusts and accumulation trusts.
Naming an individual as the beneficiary of a retirement account can work well in certain circumstances. However, it sometimes makes sense to divert retirement account proceeds to a trust for the benefit of an intended beneficiary rather than naming the beneficiary outright. In most circumstances, any trust can be named as the beneficiary of a retirement account. However, the type of trust that is used and the identity of the trust beneficiaries can have a substantial effect on the beneficiary's access to the account proceeds and the income tax treatment of the account proceeds. It is therefore generally best to use a trust that is specifically created to receive retirement account proceeds, and these trusts are generally referred to as see-through trusts. See-through trusts generally take the form of a conduit trust or an accumulation trust.
The rules regarding see-through trusts for retirement accounts are complex and detailed. Most importantly:
- The trust must qualify as a see-through trust.
- Counsel must understand the payout period applicable to the trust beneficiary or beneficiaries (generally eligible designated beneficiaries, designated beneficiaries, or beneficiaries who are not eligible designated beneficiaries or designated beneficiaries).
- Counsel must determine whether an accumulation trust or a conduit trust (or a trust that does not qualify as either a conduit or accumulation trust and is therefore not a see-through trust) best suits the client's needs.
- Counsel must ensure that the identity of the trust beneficiaries does not inadvertently shorten the payout period applicable to the primary beneficiary if maximizing that payout period is the client's primary concern.
This Toolkit contains continuously maintained resources to help counsel understand and draft provisions creating see-through trusts for retirement account proceeds.